The government was warned on Thursday that it is running the risk of abusing parliament in its attempts to reverse a triple defeat in the House of Lords over plans to cut benefits for disabled people.

Labour, which accused the government of crossing the line of decency with its reforms, pledged to fight any coalition effort to use special parliamentary procedures to reverse the votes.

The row erupted after Lord Freud, the welfare reform minister, surprised peers late on Wednesday night by tabling a new amendment. Freud acted after peers rejected plans to means-test employment and support allowance (ESA) payments for disabled people – plus cancer patients and stroke survivors – after only a year. Peers also rejected plans to time-limit ESA for cancer patients and to restrict access to ESA for disabled or ill young people.

But the minister's amendment partially reversed the vote on young people.

Lady Hollis of Heigham, Labour's former welfare minister, criticised the Freud amendment – tabled after most peers had left parliament for the evening in the belief that there were no further substantive votes.

Hollis told peers: "I am sure Lord Freud doesn't wish to appear to be subverting the view of the entire house, which was expressed in the full knowledge that the amendment which we voted on was devised as a paving amendment to a substantive one so that we could debate it in good time."

Clerks in the Lords indicated that Freud's amendment was procedurally correct. The minister had earlier indicated that he might table the new amendment.

But Lady Royall of Blaisdon, Labour's leader in the upper house, was highly critical of the coalition tactics as she pledged to try to reverse the Freud move.

"The early votes last night clearly reflected the will of the whole house, which will now expect ministers to bring forward amendments at third reading," she said.

"If they fail to do so, Labour will table our own amendments in consultation with crossbench peers and other interested parties."

Labour also hit out at government plans to block the triple defeats by using what is known as "financial privilege" on the welfare reform bill to make it impossible for the Lords to reject the will of the House of Commons.

The government has pledged to reverse the defeats when the bill returns to the Commons. Using financial privilege would avoid parliamentary "ping pong", in which the bill is shunted between the two houses of parliament, because the lords cannot block money bills.

Royall said: "Retrospectively using financial privilege on a bill primarily to do with the delivery of policy would be unreasonable and open the door to the potential abuse of parliament by government."

Downing Street confirmed that ministers were prepared to try to use the device, though it would have to be approved by the commons speaker John Bercow.

The prime minister's spokesman said: "The issue of financial privilege is something which is ultimately a matter for the House of Commons and the speaker to determine. It is they that decide on the application of this.

"In any event, ministers have said they are intending to reverse the amendments that were made to the bill in the Lords. So there is a question about the precise process. But the outcome is the same."

Liam Byrne, the shadow work and pensions secretary, wrote on the Guardian website: "Last night in the House of Lords, the government tried to ram through proposals that cross the line of basic British decency, axing help for young people with disabilities and for patients still recovering from cancer. How low can you get?"